Deductions for Donations : Exemption under section 80G of the Income Tax Act, 1961
Know about deductions allowable under Section 80G of Income Tax Act
Any person or 'assessee' who makes an eligible donation is be entitled to get tax deductions subject to conditions. Section 80G offers a tax deduction for donations to certain prescribed funds and charitable institutions. Here are the details of the section.
This section is applicable to all assessees, who make an eligible donation, whether an individual, HUF, NRI or a company.
Qualifying Limit (Deduction Limit)
The extent of deduction is either 50% or 100% of the contribution, depending on the charitable institution donated to.
For certain fund the qualifying limits u/s 80G is 10% of the adjusted gross total income. The limit is to be applied to the adjusted gross total income. The 'adjusted gross total income' for this purpose is the gross total income (i.e. the sub total of income under various heads) reduced by the following:
- Amount deductible under Sections 80CCC to 80U (but not Section 80G)
- Exempt income
- Long-term capital gains
- Income referred to in Sections 115A, 115AB, 115AC, 115AD and 115D, relating to non-residents and foreign companies.
Donations Eligible For Deduction
The donation may be paid either out of taxable or exempted income.
Only donations made in cash or cheque are eligible for deductions. Donations made in kind, in the form of food, clothing, medicines etc are not eligible.
Donations to foreign charitable trusts are not eligible for any deduction.
Donations to Political parties are not eligible for deduction.
All donations are not qualify for a deduction and are not eligible for tax benefits. Tax benefits can be claimed only on specific donations. Here is a list of approved charitable institutions and funds that qualify for a deduction.
Donations with 100% deduction without any qualifying limit:
- Prime Minister's National Relief Fund
- National Defence Fund
- Prime Minister's Armenia Earthquake Relief Fund
- The Africa (Public Contribution - India) Fund
- The National Foundation for Communal Harmony
- Approved university or educational institution of national eminence
- The Chief Minister's Earthquake Relief Fund, Maharashtra
- Donations made to Zila Saksharta Samitis.
- The National Blood Transfusion Council or a State Blood Transfusion Council.
- The Army Central Welfare Fund or the Indian Naval Benevolent Fund or The Air Force Central Welfare Fund.
- Army Central Welfare Fund, Indian Naval Ben. Fund, Air Force Central Welfare Fund.
- National Illness Assistance Fund
- Chief Minister's or Lt. Governor's Relief Fund
- National Sports Fund
- National Cultural Fund
- Govt./ local authority/ institution/ association towards promoting family planning
- Central Govt.'s Fund for Technology Development & Application
- National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation & Multiple Disabilities
- Indian Olympic Association/ other such notified association
- Andhra Pradesh Chief Minister's Cyclone Relied Fund
Donations with 50% deduction without any qualifying limit.
- Jawaharlal Nehru Memorial Fund
- Prime Minister's Drought Relief Fund
- National Children's Fund
- Indira Gandhi Memorial Trust
- The Rajiv Gandhi Foundation
- Donations to govt./ local authority for charitable purposes (excluding family planning)
- Authority/ corporation having income exempt under erstwhile section or u/s 10(26BB)
- Donations for repair/ renovation of notified places of worship
- World Vision India
- Udavum Karangal
Donations to the following are eligible for 100% deduction subject to 10% of adjusted gross total income
- Donations to the Government or a local authority for the purpose of promoting family planning.
- Sums paid by a company to Indian Olympic Association
Donations to the following are eligible for 50% deduction subject to 10% of adjusted gross total income
- Donation to the Government or any local authority to be utilized by them for any charitable purposes other than the purpose of promoting family planning.
What points should be kept in mind for claiming deduction?
Donations in cash/cheque are eligible for the tax deduction and donations in kind do not entitle for any tax benefits.
For claiming deduction under Section 80G, it is mandatory for the donor to furnish a receipt issued by the recipient trust as proof of payment towards the eligible fund or institution. A stamped receipt is issued by the recipient trust in this regard, which must be attached by the assessee along with the income tax returns.
The donation receipt must include the following details and Tax benefits cannot be claimed without these details mentioned in the receipt
- Name and address of the trust
- The name of the donor
- The amount donated, mentioned in words and figures and date of donation
- The registration number of the trust, as given by the income tax department under section 80G, along with its validity period.
Donations deducted from Salary
Where donation have been contributed towards eligible charitable fund from the salaries of employees and the donation receipt issued in the employer's name. The deduction under section 80G can be claimed by the concerned employees. In such cases, the employer would need to issue a certificate mentioning that the contribution was made from the employee's salary account.
Computation of Tax benefit (Exemption) of Donation
Tax benefit of donation depends on donations made to trust/fund i.e to private trusts or to approved charitable institutions / funds that qualify for deduction of 100% or 50% and the rate of Tax applicable to the Assessee
The following example will show computation of Tax benefits claimed on donations to private trust or donations to trusts / funds set up by the Government:-
- Mr. ABC a taxpayer and his gross taxable salary = Rs. 550000
- Investment qualify deductions under section 80C = Rs. 150000
- Donation = Rs. 45000
- Case I - Presuming that the donations made to - private trusts
- Case II - Presuming that Donations made to - trusts/funds set up by the Government
(In this category, the entire amount donated i.e. 100 per cent of the donation amount is eligible for deduction)
|Case I - Donation to private trusts ||Case II - Donations to trusts/funds set up by the Government
|Gross salary ||Rs. 550000 ||Rs. 500000
|Less: Deduction under section 80C restricted to ||Rs. 150000||Rs. 150000
|Gross total income (before 80G)||Rs. 400000||Rs. 400000
|Actual amount of donation||Rs. 45000||Rs. 45000
|10% of Gross total income as computed above||Rs. 40000 || --
|Amount of deduction u/s 80G (Gross Qualifying Amount subject to a maximum limit 10% of the Gross Total Income) ||Rs. 40000||Donation to The Prime Minister's National Relief Fund or other funds that eligible for 100% deduction without any qualifying limit|
In this case donation of Rs. 45000- is qualifying amount of deduction
|Less: deduction under section 80G||50% of above is Rs 20000||Rs 45000
|Total income (taxable income)||Rs. 380000||Rs. 355000|